Big trouble at Caesars

In a shocking development, even for those of us who have followed Caesars Entertainment closely, the company is shutting down Harrah’s Tunica (formerly Grand Casino Tunica) on June 2. Regional president John Payne confessed to
Bloomberg News that the casino hadn’t been profitable for some time. As a consequence, 1,300 people will be thrown out of work. “There’s just too much supply in that market,” says Payne and much of it belongs to Caesars, which owns three casinos in Tunica. Caesars even tried selling the property but couldn’t find any takers. (It makes you wonder about market conditions in Atlantic City, where Caesars is even more exposed.)

Malaise in the market is partly to blame. What was a $1.2 billion jurisdiction in 2006 was down to $738 million last year. Interestingly, Full House Resorts just bought into Tunica, but at a low price point and for an off-brand casino (Fitzgeralds). Caesars still has two casinos — Horseshoe Tunica and Tunica Roadhouse — in the market, along with 1,700 workers. The fall of this outpost of the Roman empire is best seen in the wider context of a prolonged decline at the Mississippi River casinos. Said Caesars spokesman Gary Thompson, ““What we do have are a number of loyal players in the market, but not enough to support three properties.” Many of the less-loyal players were driven away from the Tunica market by widespread flooding in 2011 that closed many casinos, sending players to have a fiddle elsewhere. Outlying parimutuels siphoned away customers.

Caesars’ decision to close Harrah’s and not Roadhouse or Horseshoe runs a cart and horses through the tourism counteroffensive being launched by Tunica Convention & Visitors Bureau CEO Webster Franklin. “They are closing the one [casino] that has the most tourism amenities,” he lamented.

The Tunica casinos outgrossed their Gulf Coast brethren last month, but the latter held their ground while Tunica fell 6%. The nascent gambling market in Arkansas, meanwhile, grew 6%. Meanwhile, the Choctaw Indians continue to expand in Mississippi, eyeing Carthage as their next conquest.

In business-as-usual Caesars news, Caesars Growth Partners is looking to borrow $1.2 billion at 5.75% above LIBOR as part of its bailout of Caesars Entertainment. However, a group of dissident debtors want to smother Little Caesars in its cradle. They assert that the Big Caesars/Little Caesars spinoff is a breach of the company’s fiduciary duties. Why? Opines The Motley Fool, “Caesars seems intent on making itself increasingly less desirable through its current asset-divestiture program.” The litigation accuses that Big Caesars “improperly transferred or seek to transfer valuable assets.” We’ll keep you posted on this story as it develops.

Euphemism of the week: “Our industry is committed to a culture of compliance and we appreciate FinCEN’s open dialogue and look forward to future collaboration.” — American Gaming Association spokeswoman Stephanie Chan. Translation: We’re not going to bend over and grab our ankles for FinCEN unless we absolutely have no choice.